WSJ/The Afternoon Report: After The Surge

Last Update: 2/11/2008 2:32:39 PM

By Robin Moroney

Of THE WALL STREET JOURNAL ONLINE

NEW YORK (Dow Jones)–The U.S. military “surge” in Iraq should be over by July.
But the question of further withdrawals looks less likely to be settled by the
Bush administration before November’s presidential election.

U.S. Defense Secretary Robert Gates said today that no American forces would
leave the country - at least for a short time - after the last of the 30,000
troops deployed to Iraq as part of the Bush administration’s troop surge return
home in July. Manpower strains had led Mr. Gates and other senior Pentagon
officials to express hopes in recent months that overall troop levels could fall
to approximately 100,000 this year. But Gen. David Petraeus, the top American
commander in Iraq, has said any further withdrawals should be determined only
after assessing post-surge security in Iraq. “I think that the notion of a brief
period of consideration and evaluation probably does make sense,” Mr. Gates said
during a stop at a military base in southern Baghdad. There are currently 155,000
American troops in Iraq. That number will fall to 130,000 when the surge troops
finish redeploying to the U.S.

Although the economy is now front and center in presidential campaigning, Iraq
has gotten increased attention recently from Democrats now that John McCain has
emerged the Republican’s apparent nominee. Sen. Barack Obama, for example, has
been lumping rival Sen. Hillary Clinton together with Mr. McCain as initial
supporters of the war. “John McCain will not be able to say that I agreed with
him on voting for the war in Iraq,” Mr. Obama told a rally in Richmond, Va., over
the weekend. And even Sen. Clinton could capitalize on a troop standstill by
saying that although the surge has reduced the killing in part by making allies
out of some former insurgents, Iraqi society isn’t close to ridding itself of
factional violence. In Baghdad on Monday, twin car bombs targeted a meeting of
U.S.-allied Sunni tribal leaders, killing at least 14 people and wounding 45. But
U.S. military assessments that troop levels should be maintained could also
strengthen the case for Mr. McCain, who can say the Democrats’ withdrawal
timelines risk squandering the gains from the surge. This means that the domestic
politics of Iraq and those of the U.S. are likely to become more intertwined over
the next few months. If a power-sharing bill in Iraq goes through, supporters of
a sustained troop presence in Iraq may pounce on it as proof that their signature
policy abroad is working. They could be waiting a long time. The bill is
currently being debated by the Iraqi Parliament, but its prospects after a series
of delays remain uncertain.

Financial Stocks Struggle

Stocks moved higher despite a sharp plunge in financial bellwether American
International Group Inc. (AIG), as General Motors Corp. (GM), Home Depot Inc.
(HD) and other heavyweights posted solid gains. Oil prices rose, helping shares
of Exxon Mobil Corp. (XOM). Around midday, the Dow Jones Industrial Average was
up 41.30 points at 12223.43. The Standard & Poor’s 500 was up 5.60 points at
1336.89. The technology-focused Nasdaq Composite Index was up 12.01 points at
2316.86. In the Treaurys market, bonds rose, with the 10-year note yielding
3.613%. The dollar fell slightly against the euro and the yen. Crude-oil futures
briefly touched a one-month high on fears that a Delaware refinery had suffered a
major failure. Light, sweet crude for March delivery was up $1.55, or 1.7%, at
$93.32 a barrel on the New York Mercantile Exchange. Asian markets ended mostly
lower, and European markets were also heading lower.

AIG Expands its Losses From Housing Meltdown

American International Group raised its estimate of a write-down related to
credit protection it has sold on securities linked to the housing market. AIG
said its credit derivatives portfolio lost $4.88 billion in gross market value in
October and November, more than four times its December estimate. The news raised
concerns that fallout from the subprime mortgage crisis will expand.

Ex-Boeing Engineer Charged With Spying

A former Boeing Co. (BA) engineer was arrested on charges of stealing trade
secrets for China related to several aerospace programs, including the Space
Shuttle, the U.S. Justice Department said. Separately, it said a U.S. Defense
Department analyst and two others were arrested on espionage charges involving
the passing of classified U.S. government documents to China.

U.S. Files Charges for 9/11 Attacks

Khalid Sheikh Mohammed and other alleged Sept. 11 leaders were charged with
murder and war crimes by the U.S. for their role in the terror attacks on New
York and Washington. The government will ask that all six defendants, now held at
Guantanamo Bay, be put to death.

Yahoo Rejects This Microsoft Bid, But Leaves Room for Another

Microsoft Corp. (MSFT) left the door open for further negotiations with Microsoft
or any other suitors, after formally rejecting the software giant’s $44.6 billion
buyout bid as too low. Any deal between Microsoft and Yahoo Inc. (YHOO) would be
complicated by the large power of mutual funds who have holdings in both
companies. Separately, Microsoft’s push into mobile technologies continued with
the acquisition of Danger, the maker of the popular Sidekick phone.

Hasbro Reports Higher Net

Strong revenue gains aided Hasbro Inc.’s (HAS) fourth-quarter net-income rise of
24%, though the increase also reflected a year-earlier charge. The rise was
tempered by weaker gross margins and lower U.S. earnings. The toy company also
said Chief Operating Officer Brian Goldner will succeed Al Verrecchia as chief
executive, who will become the chairman of the board.

In other earnings and sales news:

Despite hard times for the restaurant industry, Darden Restaurants Inc. (DRI),
the owner of Olive Garden and Red Lobster, forecast strong fiscal third-quarter
earnings thanks to positive same-store sales growth.

Loews Corp. (LTR) posted a 31% drop in fourth-quarter net income, as the
tobacco-to-insurance holding company was hurt by reduced investment income and
weaker results at its 51%-owned subsidiary, Diamond Offshore Drilling Inc. (DO).

Bank of America and Chevron Added to Dow

Bank of America Corp. (BAC) and Chevron Corp. (CVX) will replace Altria Group
Inc. (MO) and Honeywell International Inc. (HON) in the benchmark Dow Jones
Industrial Average. The change is the first in four years and reflects the
index’s continued shift away from industrial firms and into other sectors such as
energy and financial services.

Countrywide Expands Relief to Troubled Borrowers

Countrywide Financial Corp. (CFC), under pressure to help stem growing home-loan
defaults, says it will expand programs to help borrowers manage their mortgage
payments regardless of the type of subprime loan they have or whether they have
already fallen behind on payments.

Peltz Increases Pressure on Wendy’s

Triarc Cos. (TRY) Chief Executive Nelson Peltz proposed to increase the size of
fast-food chain Wendy International Inc. (WEN) board to 15 directors, saying he
plans to nominate six directors if the proposal is adopted. In November, Triarc
submitted a bid to buy Wendy’s for less than it had originally indicated it would
pay.

SocGen Launches Rights Issue

French bank Societe Generale (13080.FR) launched a heavily discounted 5.5 billion
rights issue to shore up its finances in the wake of a large trading loss and
said it expects to post a net profit of 947 million ($1.37 billion) for 2007. The
sale of shares at a discount to existing shareholders will make a hostile
takeover more difficult. The Paris-based bank also announced a 325 million
write-down related to its residential mortgage-backed securities trading
portfolio.

‘Spectacular’ Art Heist in Zurich

Three armed men in ski masks stole four paintings by Cezanne, Degas, van Gogh and
Monet valued at more than $150 million from a Zurich museum. The robbers, who are
still at large, stole the paintings from the E.G. Buehrle Collection, one of
Europe’s finest private museums for Impressionist and post-Impressionist art
yesterday evening.

-The Associated Press contributed to this report.

-Write to Robin Moroney at robin.moroney@wsj.com

(END) Dow Jones Newswires

February 11, 2008 14:32 ET (19:32 GMT)

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